NEW JERSEY: HMO Buyout Shows Big Plans’ Edge
The February 9 issue of American Medical News cites Blue Cross Blue Shield of New Jersey's purchase of Physician Healthcare Plan of New Jersey as an example of "how hard it is for small health plans to compete against the commercial behemoths." With a combined 80,000 members in its HMO and PPO plans, "small, doctor-owned" Physician Healthcare could not hold its edge in the market against the "large, well-established insurers," even "at a time when patients are rebelling against large managed care companies." Originally established by a group of doctors in 1994 who were "frustrated with dealing with large insurers," Physician Healthcare "struggled to gain market share" even though it had the endorsement of the state medical society and the New Jersey Association of Osteopathic Physicians and Surgeons. However, when the health plan admitted to "having too tough of a time competing head-to-head with large commercial insurers," its board solicited buyout bids, for which HMO Blue, a subsidiary of New Jersey Blues, was chosen. Dr. Joseph Billotti, chair of Physician Healthcare's board, said, "Major players have tremendous amounts of money, reserves, and systems in place, and it's hard to break into that arena."
As a part of the merger, the New Jersey Blues will "appoint Physician Healthcare doctors to its medical management committees." Dr. Joseph Friedlander, a primary care physician, said that "the inability of Physician Healthcare to remain on its own shows that doctors have to find new avenues to increase their voice in how health plans are run." Friedlander suggested that doctors take a "more active role in administration" or refuse a contract which did not include fair physician treatment. Other doctor-owned health plans are sure to be acquired, predicts Steven Elek, a partner in Coopers and Lybrand who tracks health care corporate finance issues. Elek said, "Those that survive will be the ones that consolidate among themselves to gain market share and have the cash reserves to develop infrastructure systems" (Jacob, 2/9 issue).